ESTATE AGENCY AFFAIRS BOARD Portfolio Committee for Human Settlements 5th October 2017 2016/2017 ESTATE AGENCY AFFAIRS BOARD ANNUAL REPORT PRESENTATION

PRESENTATION STRUCTURE OPENING REMARKS, HIGHLIGHTS AND OVERVIEW OPERATIONAL AND PERFORMANCE REVIEW FINANCIAL PERFORMANCE CLOSING REMARKS

(Acting Chief Executive Officer) OPERATIONAL AND PERFORMANCE OVERVIEW Mr. Nikita Sigaba (Acting Chief Executive Officer)

Chief Executive Officer’s Report Property sector in general and the estate agency environment; Growth in the secondary residential market; Professionalisation of the real estate sector and Continuing Professional Education; Consumer awareness campaigns and workshops; Privyseal certification and authentication programme; One Learner- One Estate Agency Youth Brigade Empowerment Programme;

Chief Executive Officer’s Report Cont/… Acts of racism, discrimination and intolerance and the Equality Pledge; The title deeds restoration programme; Legislative review; Registrations and renewals of Fidelity Fund Certificates; Education and Training; Disciplinary enquiries;

REMEDIAL ACTION PLANS - GOVERNANCE AUDIT FINDINGS No Audit Matter Raised Management response 1. Some signed minutes of board and sub-committee meetings not made available to auditors 2. Resignation of three independent Audit and Risk Committee members after year end. The resignations did not occur in the financial reporting period under review. No reasons were provided. The positions have since been advertised and the process of filling the vacancies is underway 3. Non-independent Audit Committee members performed management functions as part of their Section 8A Committee duties from February 2017. During the financial reporting period, the majority of members of the Audit and Risk Committee were independent. The resignations of the independent Audit and Risk Committee members only occurred after the financial year end. The CEO and CFO were also in attendance during the Audit and Risk Committee meetings 4. Those charged with governance procured certain forensic professional services above R500 000 without following the competitive bidding process. Deviations were approved by the Section 8A Committee even though it was not impractical to invite competitive bids. The matter was deemed to be urgent due to ongoing and unknown losses on the suspense accounts. The approval to deviate was based on a motivation by the Company Secretary as per the requirements of the PFMA. Total board and committee meetings held 28 Approved and signed minutes – submitted to auditors 18 Draft minutes awaiting sitting of next meeting – submitted to auditors 10

PERFORMACE AGAINST TARGETS IN THE ANNUAL PERFORMANCE PLAN - COMPLIANCE

PERFORMACE AGAINST TARGETS IN THE ANNUAL PERFORMANCE PLAN – EDUCATION AND TRAINING

PERFORMACE AGAINST TARGETS IN THE ANNUAL PERFORMANCE PLAN – FIDELITY FUND

PERFORMACE AGAINST TARGETS IN THE ANNUAL PERFORMANCE PLAN – CORPORATE SERVICES

REMEDIAL ACTION PLANS - PERFORMANCE INFORMATION AUDIT FINDINGS No Audit Matter Raised Root cause of audit finding Remedial action to be implemented 1. Some of the Key Performance Indicators were found to be not measurable Turnaround times for processing of claims and complaints Some technical indicators were not measurable/available and some process descriptions were not adequately documented All technical indicators are being reviewed for measurability of the key performance indicators. Process descriptions are also being updated to augment the technical indicators in achieving measurability.

REGISTRATIONS OF ESTATE AGENTS

FIDELITY FUND CERTIFICATES BY - GENDER The numbers relating to the gender of registered estate agents for the 2016/2017 financial year are indicated in the graph below.   31 March 2017 31 March 2016 Male 17 631 16 675 Female 23 610 21 828 Total 41 241 38 503

FIDELITY FUND CERTIFICATE – BY RACE The racial distribution of registered estate agents for the 2016/2017 financial year is indicated below:   31 March 2017 31 March 2016 African 4 140 3 944 Coloured 1 407 781 Indian 1 853 1 984 White 33 841 31 794 Total 41 241 38 503

INVESTIGATIONS OF COMPLAINTS AGAINST ESTATE AGENTS

COMPLIANCE Cont/… 31 March 2017 31 March 2016 Opening balance 659 736   31 March 2017 31 March 2016 Opening balance 659 736 Complaints received 6 529 4 821 Complaints investigated & finalised 6 857 3 131 Pending finalisation 331

Disciplinary Hearings   31 March 2017 31 March 2016 Cases enrolled 213 167 Convictions 115 67 Acquittals 39 23 Postponed/ withdrawn 56 32 Appeals 3 1

INSPECTIONS AND SELF-ASSESSMENTS

INSPECTIONS Province 31 March 2017 31 March 2016 1 Eastern Cape 2 20    Province 31 March 2017 31 March 2016 1 Eastern Cape 2 20 Free State 8 22 3 Gauteng 211 4 KwaZulu Natal 9 69 5 Limpopo 6 Mpumalanga - 18 7 North West 13 Northern Cape Western Cape 93 TOTAL 63 474

Self-assessment of Compliance Principals of estate agencies were selected to complete the self-assessment of compliance electronic questionnaire, which was made available on the MyEAAB Agents Portal on the EAAB website. Province 31 March 2017 Eastern Cape 39 Free State 15 Gauteng 178 KwaZulu Natal 61 Limpopo 7 Mpumalanga 6 Northwest 5 Northern Cape Western Cape 161 TOTAL 479

CONTRIBUTION TO MEDIUM TERM STRATEGIC FRAMEWORK (MTSF) TARGETS

MTSF TARGETS

REMEDIAL ACTION PLAN - MTSF TARGETS AUDIT FINDINGS No Audit Matter Raised Root cause of audit finding Remedial action to be implemented 1. Some of the Key Performance Indicators were found to be not measurable Listenership Transactional support data All MTSF targets established and set by DHS. Some technical indicators were not measurable/available and some process descriptions were not adequately documented All technical indicators are being reviewed for measurability of the key performance indicators. Process descriptions are also being updated to augment the technical indicators in achieving measurability. 2. Insufficiency and inadequacy of evidence provided to support some achieved targets Readerships Project management Intern placement The supporting documentation was not aligned to the technical indicators and process descriptions

FINANCIAL PERFORMANCE OVERVIEW (EAAB Acting Chief Financial Officer) Mr. Thomas Makupo (EAAB Acting Chief Financial Officer)

FINANCIAL STATEMENTS - 2016/2017 Estate Agency Affairs Board ANNUAL REPORT AND FINANCIAL STATEMENTS - 2016/2017

REMEDIAL ACTION PLANS - FINANCIAL INFORMATION AUDIT FINDINGS No Audit Matter Raised Impact on audit report Root cause of audit finding Remedial action to be implemented 1. Examination revenue not recognised in terms of GRAP 9 Basis of qualified opinion IT System Configuration – The system was configured to allocate a examination seat number, raise an invoice on completion of the online enrolment and payment of examination fees The system configurations are currently being amended to ensure the recognition of examination revenue on the date when candidates sit for the examinations or when the candidate do not sit for the examination without an acceptable valid reason. 2. Accuracy and completeness of revenue from fidelity fund certificates raised as an audit finding as a result of duplicate estate agent profiles found during an applications control audit The IT Configuration on matching of ID Numbers did not work as intended in that a few duplicate estate agent profiles were identified The duplicate estate agent profiles, although only few were identified, brought into question the data integrity. The implementation of recommendation on the IT application controls and matching of ID numbers is currently in progress and will eliminate the future creation of duplicate profiles. The resolution of the duplicate estate agent profiles already identified has been finalised.

REMEDIAL ACTION PLANS - FINANCIAL INFORMATION AUDIT FINDINGS No Audit Matter Raised Impact on audit report Root cause of audit finding Remedial action to be implemented 3. Classification of unallocated receipts as a result of long outstanding receipts received without reference numbers Basis of qualified opinion Deposits into the EAAB account were made by estate agents without using the unique seven digit reference number allocated to them The bank is in the process of recognising EAAB as a beneficiary, with relevant fields for references restricted to the seven digit reference. This will completely eliminate deposits without reference numbers which will end up in unallocated receipts. Implementations of recommendations arising from the audit of the suspense accounts

FINANCIAL PERFORMANCE

REASONS FOR SIGNIFICANT DEFICIT INCURRED Accounting deficit of R38 million arising from the transfer of 45 employees from defined benefit pension plan to defined contribution pension plan – the deficit represented the difference between the pension fund obligation determined on a prescribed basis and the conversion credits awarded to the 45 employees on conversion. Over-budgeting of revenue of R12 million – it was initially assumed that all estate agency firms will pay the R1 200 renewal fee, but to promote transformation in the sector, firms with revenue below R2,5 million were eventually exempted when the new regulations were published.

FINANCIAL POSITION - ASSETS Remove the Note numbers

FINANCIAL POSITION – LIABILITIES & RESERVES

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